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Media type:
E-Book;
Report
Title:
Affordability, financial innovation, and the start of the housing boom
Contributor:
Dokko, Jane K.
[Author];
Keys, Benjamin J.
[Author];
Relihan, Lindsay E.
[Author]
Published:
Chicago, IL: Federal Reserve Bank of Chicago, 2019
Language:
English
DOI:
https://doi.org/10.21033/wp-2019-01
Origination:
Footnote:
Diese Datenquelle enthält auch Bestandsnachweise, die nicht zu einem Volltext führen.
Description:
At their peak in 2005, roughly 60 percent of all purchase mortgage loans originated in the United States contained at least one non-traditional feature. These features, which allowed borrowers easier access to credit through teaser interest rates, interest-only or negative amortization periods, and extended payment terms, have been the subject of much regulatory and popular criticism. In this paper, we construct a novel county-level dataset to analyze the relationship between rising house prices and non-traditional features of mortgage contracts. We apply a break-point methodology and find that in housing markets with breaks in the mid-2000s, a strong rise in the use of non-traditional mortgages preceded the start of the housing boom. Furthermore, their rise was coupled with declining denial rates and a shift from FHA to subprime mortgages. Our findings support the view that a change in mortgage contract availability and a shift toward subprime borrowers helped to fuel the rise of house prices during the last decade.